Skip to content

CMA Foundation · Fundamentals of Financial and Cost Accounting · Accounting Cycle

The Account of Mehta & Co. (a customer) in the ledger of Rao Traders shows: opening balance Rs 18,000 (debit); goods sold on credit Rs 42,000; cash received Rs 35,000; goods returned by Mehta Rs 4,000. What is the closing balance and its nature?

The closing balance is Rs 21,000 debit. Debits total Rs 60,000 (opening balance plus credit sales) and credits total Rs 39,000 (cash received plus sales returns). The difference of Rs 21,000 is the amount Mehta & Co. still owes, a debit balance.

  1. ARs 21,000 debitCorrect
  2. BRs 29,000 credit
  3. CRs 21,000 credit
  4. DRs 25,000 debit

Explanation

Debits = 18,000 + 42,000 = 60,000. Credits = 35,000 + 4,000 = 39,000. Balance = 60,000 - 39,000 = Rs 21,000 debit. Rs 25,000 results from ignoring the goods returned.

Did you get it right without looking?

One question tells you little. A timed set on Accounting Cycle shows your real accuracy, how long you take and where you lose marks.

Practise Accounting CycleFree diagnostic mock

More Accounting Cycle questions